Do I Have to Pay Taxes on the Money My Grandmother Gives Me to Help With Her Care?

Getting her coffee and answering her mail may only be the beginning of the work you do for your grandmother. If you have a regular schedule with your grandmother, wherein you care for her and take care of her household and personal needs, she may feel compelled to pay you. If you’re wondering if you have to pay taxes on the money she gives you, take into consideration the intent and amount of money you will be getting.

Job Description

Keep in mind what the purpose and plan for this arrangement is. If your grandmother has offered you this job, in lieu of your other full or part time job, you should probably consider the money she pays you to be income, which subjects you to income tax. However, if you stop in occasionally, sometimes going beyond your normal expectations, and she compensates you for that, it may be a gift, which may be exempt from taxes.

Limits

As of August 2010, the IRS allowed people to give $13,000 to any one individual per year. For example, your grandmother can give you $13,000 per year without any taxes being incurred. If you care for your mother with your child or spouse, she can give a gift to them as well. She can give you and your child and your spouse–each–up to $13,000 per year.

Alternatives

According to a TurboTax article, there are two exceptions to the gift tax limits. If the payment goes directly to medical or academic expenses, gift taxes may be avoided. For instance, if you are attending school, the payments can be made to your school on behalf of your tuition or books. If you have ongoing medical expenses, the payment can go to a hospital.

Paperwork

You should note that gift taxes will be paid by your grandmother, not yourself. However, if you are the one who files her taxes and cares for her paperwork, you will have to file a Form 709, if you need to file gift taxes. On your behalf, you need to fill in your income tax form with the amount you have received, if you consider the gift to be income.

Professional Advice

If you are unsure about your and your grandmother’s obligation, you should consult with at tax adviser. Be upfront about the situation and the amount of money. Taking care of the taxes now will be less painful than paying interest later.